Exempt Organization Tax Review
A great deal of media attention has focused on recent perceived financial abuses of churches and religious organizations. Cases of fraud within religious organizations have fueled the public perception that churches require some form of monitoring to prevent financial abuse. However, the IRS has limited authority to audit religious organizations under section 7611, and the results of such audits are generally unavailable to the public.
Through a Freedom of Information Act request, we obtained the outcomes of all section 7611 IRS audits of religious organizations conducted between 2001 and 2010. We found that although the number of both churches and nonchurch-related organizations (NCROs) increased significantly during the period examined, the number of IRS audits did not rise.
We also analyzed religious organizations’ chances of being selected for an IRS examination and the likely outcome of an examination. In most cases the audits ended with no change to the organization’s status, or a delinquent tax return was secured.
This information is useful for churches that may face or are currently under IRS examination. Further, this information can help tax practitioners assess examination outcomes and advise clients.
Copyright © 2013, Tax Analysts
Webber, Sarah J. and Greenlee, Janet S., "Should Religious Organizations Worry about IRS Audits?" (2013). Accounting Faculty Publications. 55.
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